Q4 2024 Ark Restaurants Corp Earnings Call
We've been negotiations with them and we feel we made actually a very good deal we have approximately four and a half years left on the lease and theyre going to pay us $5 $5 million to vacate the space, There's really a couple.
A couple of small cost involved some legal fees and severance but.
Theyre going to demolish it in.
Buena cleanup, so we would be out of there probably by the end of the year I think it closed recently.
Possibly so we're now in the process of taking any equipment that.
We want to the locations so other than that.
Michael: That's all I have I'll turn it over to Michael.
Michael: Everybody. So that's the theme.
Speaker Change: Here is <unk>.
Speaker Change: Reduced sales just challenging revenue environment and expenses.
Speaker Change: Have not abated.
Speaker Change: And in certain cases, like insurance premiums, which you spoke to before increasing labor costs.
Speaker Change: I'm not increasing.
Speaker Change: Unless at this point, unless it's legislation, which.
Speaker Change: Las Vegas put through some increases minimum wage increases.
Speaker Change: That's a enacted.
Speaker Change: But pretty much labors for the first time in a couple of years it seems to have stabilized.
Speaker Change: We're finding good people at price points that are.
Speaker Change: Our significantly compatible with what we would expect in each of the markets.
Speaker Change: We got through the year in the quarter, we still see challenging revenue environments in Florida.
Speaker Change: And in Washington D C. Alabama is good.
Speaker Change: That's probably our most consistently good.
Speaker Change: Good performing.
Las Vegas.
Speaker Change: The revenues are okay, but again the expenses from payroll inactive payroll increases.
Speaker Change: Have eaten into our margins.
Speaker Change: New York our businesses is these.
Speaker Change:
Speaker Change: Hi.
Speaker Change: Not very much to say and in the way of new business that was China put on our books, we've been looking at a few things.
Speaker Change: We've had some negotiations.
Speaker Change: Nothing fruitful has happened we continue to look.
Speaker Change: Meadowlands.
Speaker Change: Remains the same story.
Speaker Change: Until New York close the trigger on.
Speaker Change: Our downtown Casino licenses I don't think we'll see any activity from from New Jersey.
Speaker Change: So that remains a question as to timing I think a R. R.
Speaker Change: Our ability to get a casino license.
Speaker Change: Profitability.
Speaker Change: And in our venue at the race track and Northern New Jersey.
Speaker Change: Is probably improving all the time from the point of view of the legislature.
<unk> seen that as the easiest solution.
Speaker Change: It's possible location, but again the legislation.
Speaker Change: Some measures.
Speaker Change: So that's my story.
Speaker Change: Hum take questions at this point.
Speaker Change: Thank you do you will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
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Speaker Change: You May press Star two if you would like to remove your question from the queue.
Speaker Change: Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Once again, if you would like to ask a question press star one on your telephone keypad.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: Thank you. It appears we have no further questions at this time.
Speaker Change: No I'm sorry, we did get a question from.
Martin Gilbert with M. H Gilbert consulting. Please proceed with your question.
Speaker Change: Hi, Michael how are you.
Speaker Change: Went over to the other side of the.
Speaker Change: Florida.
Speaker Change: To your restaurants.
Speaker Change:
Speaker Change: With over it.
The tourists.
Speaker Change: Nice little ride to each of them, but it was worth it they.
Speaker Change: They're doing well.
Speaker Change: I just wanted to check in with you on.
What are the.
Speaker Change: The developments, where with this were cut understand what what it means.
Speaker Change: Wall Street Journal article recently about SL Green.
Speaker Change: Success in New York City in terms of turning around.
The.
The the opposite situation and that they are well known.
Speaker Change: Looked like it was going to happen for sure. They are going to open a casino and one of their buildings is that accurate and is that the driver that are that you speak of that well that will make things happen for the meadowlands.
Speaker Change: So there are three downtown licenses available.
Speaker Change: There are several.
Speaker Change: Bidders to get those licenses to downstate I'm, sorry downtown state licenses, meaning.
Speaker Change: Queens Manhattan Brown.
Speaker Change: Bronx Staten.
Speaker Change:
So there are three available too.
Speaker Change: Two of them are pretty much spoken for one will go to aqueduct.
Speaker Change: <unk>, which has.
Speaker Change: <unk> right now in the form of slot machines, and Yonkers Raceway, which also has gaming in the form of slot machines. So you have that SL green trying for one you have hudson yards trying for one yeah, Steve cone.
Speaker Change: <unk> added Shea stadium trying for one.
Speaker Change: Bally's is out in the Bronx at the old trunk property trying for one on the the question that everybody shakes ahead about as well each of these license, it's going to cost a half a billion dollars to acquire and the amount of revenue tax revenue on it.
Speaker Change: Consistent basis.
Speaker Change: Going to the state would be considerable so what are they.
Speaker Change: You know waiting for why don't they pull the trigger I think you know one of the reasons is the bidders have.
Speaker Change: Yes ill try to make.
Make the proposals more attractive as they went along.
Speaker Change: But they're at the point now where they should decide and it will be the catalyst for Jersey to move the minute that you see.
Speaker Change: Bergen County in the Northern Cathy's, leaving New Jersey.
Speaker Change: To come to New York and spring, bringing their gaming monies are.
Speaker Change: New Jersey is going to find out how much tax revenue they've lost gaming revenue Atlantic City has been in declination for decades, what's stopping.
Speaker Change: The state right now from approving a casino in the north hopefully all location is a strong lobby and in Atlantic city, but that lobby disappears. Once you know casinos approved and in Manhattan, or the Bronx or or Queens.
Speaker Change: That will disappear.
Speaker Change: The interesting thing is metals metal land location.
Speaker Change: If you're in Manhattan.
Speaker Change: It's easier to get to the Meadowlands than it is to get to act with Doctor Yonkers, So because we think [laughter].
Speaker Change: Yeah, we think our location in the Meadowlands is not only keeps new jersey patrons in place, but it also brings traffic from Manhattan, which new Jersey does not anticipate but I think it will be a reality, so and who advocates for us on that point.
Speaker Change: Partner there is a is as who I'm sorry, I just don't remember.
So we have a.
Speaker Change: You know where where of the.
Speaker Change: Four.
Speaker Change: Partners with whereas you know we own the least equity.
Speaker Change: On a fully diluted basis, we own 7% of the equity of the Meadowlands Racetrack L. L C.
Speaker Change: But we do have a an exclusive on all of the food and beverage in the casino if it happens.
Speaker Change: With a carve out for a hard rock cafe, our original partner in this and who owns 20% of.
Speaker Change: Of of an entity that owns on a fully dilutive basis would be about 10%.
Speaker Change: It's hard rock cafe.
Speaker Change: Hardrock.
Speaker Change: Which is seminal Indian tribe.
So.
What happened is that that was.
Speaker Change: A very favorable agreement for us.
Speaker Change: In that Hardrock also operates in Atlantic City and the initial legislation.
Speaker Change: When there was an attempt to get a casino in the north.
Speaker Change: Five years ago was that whoever.
Speaker Change: Had the rights to casino license in the North would have to have an Atlantic city partner.
Speaker Change: You need somebody licenses in Atlantic City, So hard rock was a good fit for us because they were licensed and that's how they became partner hard rock is now all aligned.
Speaker Change: Aligned with Steve cone at Shea Stadium so.
Speaker Change: <unk>.
Speaker Change: We don't know.
Zach: Zach cones going get it if they do get it we don't know what our relationship with hard rock was wind up to be.
Zach: At various points, there's been conversations as hard rock goes to cone that there will be some sort of compensation to the Midlands because its hard trucks interest in the.
Zach: The other casino.
Zach: In New York.
It's really up in the air but we.
Zach: We don't even know if the legislation when new legislation comes forth and New Jersey, whether it's going to require an Atlantic city partner. So there's a lot of stuff thats unanswered.
Speaker Change: Fair enough Yeah, no I, just wanted to understand who would be advocating for.
Speaker Change: The the site two to get that win when in fact, New York moves.
Speaker Change: You know the <unk>.
Speaker Change: 40, guys in the legislature, who were all from Northern New Jersey, who were all ready to go with whoever it is that's the leader of our.
Speaker Change: Of the group in the Meadowlands is kind of where I was going.
Speaker Change: Well believe me we have lobbyists.
Speaker Change: Well, we're in touch with the Governor we are in touch with.
Speaker Change: The president and the Senate in Jersey, I mean, they're there conversations taking place to try to educate everybody why our site is the best site.
Speaker Change: Got it okay, and just another piece on the financial and.
Speaker Change: What what is it's actually a two part.
Speaker Change: What is the.
Speaker Change: Some of the non cash write downs that we've taken in the last two years have I am I right to say $15 million and these are noncash write downs right. This is associated with that.
Speaker Change: But over a company market cap less than the book value or something like that.
Speaker Change: Correct. It's all has to do what our stock price a lot of it has to do with our stock price they've been all noncash write downs, yes, the goodwill.
Speaker Change: Right in the ballpark of $15 million.
Speaker Change: The goodwill was 14.
Speaker Change: So coil assets were two and a half so 16 and a half.
And so Korea continues to operate but you've just written down whatever the.
Speaker Change: The asset value is because it's a it's it's got poor results.
Speaker Change: We had to take an impairment on the fixed assets in the third quarter because of the results.
Fourth quarter the results were were what.
Speaker Change: What we expected maybe a little better. So we did not we revisited that analysis, we did not have to take additional write downs, we will continue to monitor it every quarter and as well as the auditors are looking at it every penny and Sequoia is cash flow positive I don't want you to think that we're bleeding money there.
Speaker Change: Okay. Okay. So and then and then the last question was so what do we lose so we're getting the four and a half million for Tampa.
Speaker Change: Oh, there four and a half.
Speaker Change: Minus minus the 900000, what are what do we lose the.
Speaker Change: And EBITDA basis on an annual basis that we were getting from that location.
Speaker Change: Absolutely.
Speaker Change: We're getting five and a half million Ah, but some of that belongs to investors. So on that will be.
Speaker Change: Properly three and a half to $4 million for us.
Speaker Change: The property was cash flowing.
Speaker Change:
Speaker Change: 700000, plus a few dollars.
Speaker Change: We had we had.
Speaker Change: A little over four years left maybe four years two months left on the lease at this point.
Speaker Change: So we did well, but but on the other hand, we had a.
Speaker Change: We had a buy out some partners to who are more aggressive about what they thought they should be getting.
Speaker Change: But but will not will net out.
Speaker Change: <unk>, three and a half from 4 million Bucks out of it so that will be added to the cash on our balance sheet.
Speaker Change: Right right yes.
Speaker Change: It's an impressive.
Speaker Change: And again.
I don't know what the solution is to drive more volume in Florida, but all.
Speaker Change: All the customers seemed happy reasonably busy and our superb service and good quality I mean, you certainly I had never been to one of our restaurants before.
Speaker Change: Can it be over there for other reasons business why is it I thought.
Speaker Change: So that outstanding experience and the and maybe it's just a question of making sure that the more people know how good it is.
Speaker Change: So just to follow up on that comment.
Speaker Change: We are really.
Speaker Change: Okay.
Speaker Change:
Speaker Change: Aggressive.
Speaker Change: About being in our restaurants.
And.
Speaker Change: Management at the corporate level.
Speaker Change: About being in our restaurants, and making sure our quality and service are.
Speaker Change: At our.
Speaker Change: Level of expectation.
Speaker Change: And I would tell you that.
Speaker Change: Without exception.
Speaker Change: I think we are delivering on product and service and value.
Speaker Change: One of the problems, we have with margins as a reluctance to raise prices and and we don't want to raise prices when demand is soft and.
Speaker Change: Demand remains soft so so we're sort of stuck right now.
Speaker Change: Although in some cases, we're finding places to re and in <unk>.
Speaker Change: Individual restaurants to reengineer payroll and we started that program, maybe a month and a half two months ago.
Speaker Change: So we think there'll be some payroll savings, but in general we're pretty efficient with payroll so not a lot, but we're doing everything we can.
Speaker Change: Until we have you know.
Speaker Change: The comfort that we can raise prices or or food costs go down and rustic inn for it and I had this conversation this morning.
Speaker Change: Our we're known for our King crabs.
Speaker Change: Pre pandemic, we were charging $75 for a two pound orders now for two pound order, we're charging a 135, but the prices are keen cribs keep going up every single month. So it's like a race how much can you charge and at what point to customer.
Speaker Change: Scott.
Speaker Change: Leery about spending money and.
Speaker Change: I think we can't go higher even though our costs are going higher so well I'd never I would never tell you one way or the other you know just a.
Speaker Change: Nothing more than a customer and an investor. So I don't know the details, but I will say that didn't seem to be anybody unhappy.
Speaker Change: And I'm always amazed at.
Oh, I guess, that's the challenge of being in the crab business, it's kind of like being planners peanuts youre tied to a commodity that one Brian product commodity there is really a dominant factor, but at the other restaurants I'm I'm amazed at the consumer, especially living in Naples, the consumer's ability to accept a price increase.
Speaker Change: He says I mean, we're our stuff here is is up 50% probably from where it was pre COVID-19.
Speaker Change: I'm talking about the general line I mean, everything from a fillet to a to a to a uh huh.
Speaker Change: A group of Ah, you're talking 50% at least up from from Covid.
Speaker Change: Yes I.
Speaker Change: I agree. Thank you. Thank you for further insights and I appreciate the again, what you're doing I'd just to add the.
Speaker Change: The New York situation, I don't even want to get into asking questions about that.
Speaker Change: Good luck with the resource I think here I think that's the route you Gotta go I mean these people are misreading yeah. It was treating a good organization, which is unfortunate.
Speaker Change: Thank you. Thank you.
Speaker Change: Yeah.
Speaker Change: A final reminder, if you would like to ask a question press star one on your telephone keypad.
Speaker Change: Our next question comes from the line of Jeffrey Kaminsky with J J K consultants. Please proceed with your question.
Jeffrey Kaminsky: Oh, good morning, gentlemen are with respect to the.
Jeffrey Kaminsky: The lease termination in.
Speaker Change: Hollywood Tampa Tampa.
Speaker Change: Kind of walk us through the ante a bit in terms of what.
The payout will be too.
Speaker Change: And in the press release, there was also a reference to Hollywood Tampa investment LLC, which will distribute approximately 35% of it that proceeds can you tell us who is that 35%.
Speaker Change: I didn't realize it at an outside investor.
Speaker Change: Digital properties.
Speaker Change: So so geoffrey.
Speaker Change: Good morning, what what happened is when we did the steel 20 years ago, some 20 years ago.
Speaker Change:
Speaker Change: Our stock price.
Not that it's improved R. R.
Speaker Change: Our investment was going to be 5 million Bucks.
Speaker Change: And.
Speaker Change: We had.
Speaker Change: A projection that if we were right.
We would make a million bucks.
And the you know in Tampa, Alright, and.
And we're looking at our EBITDA and the multiple our stock trades to EBITDA and we wanted to do the deal because it was an in with hard rock and that helped us.
Speaker Change: Doing both Hollywood and hardrock turned out to be a great deal.
Speaker Change: For us.
Speaker Change: But you know again, we're saying, we're putting $5 million in we're going to get a 20% return and and therefore, you know the stock won't move with trading cash and the stock will you now.
Won't won't do anything is trading at five times EBITDA.
Speaker Change: So the way to do the deal was to bring investors take them take a gives the investors or perhaps take a management fee and then split cash flow 50, 50 at the time with them.
Speaker Change: So and they put it in the whole $5 million. So we had you know.
Speaker Change: Overcome.
Speaker Change: The bad equation, we have in terms of a multiple on EBITDA. So the investors did very well they've been enjoying a 30% return.
Speaker Change: Essentially and we did well because we had no capital expense.
Speaker Change: And just to further that when arc first did this deal.
Speaker Change: Yeah.
Speaker Change: This these entities were not consolidated it was a management deal and the rule and if you recall and I don't know probably 10 years ago. The variable interest entity rules changed and with those new rules. It was determined that arc had the controlling financial interest and started consolidating the food courts in Florida and then.
Speaker Change: At some point a couple of years after that we bought out a few up all of the shareholders and that's how arps ownership got up to 65%. It was initially 50 50 and now at 65% so that that entity that you see in the press release that is the holding company. So the underneath that as arc, Tampa LLC, which runs.
Speaker Change: The Tampa Food Court and our Hollywood that runs the Hollywood Food Court. So you know the $5 five will come into Tampa get upstream to the investment company and then after expenses, 35% will get distributed to the limited partners of investment LLC.
Speaker Change: Okay I understand and just is there are there any other similar.
Speaker Change: So it's within the organization, where authors taken it outside investors on individual properties.
Speaker Change: How long of a Hollywood.
Speaker Change: Hollywood and El Rio Grande.
Speaker Change: Rio Grande was 40 years ago, we did El Rio Grande in 84.
Speaker Change: Right.
Speaker Change: Okay.
Speaker Change: Right fair enough.
Then.
Speaker Change: Second question with respect to <unk>.
Speaker Change: Mike You had mentioned that twice in this call you know the stock price are going back to one.
Speaker Change: Negotiated the Tampa deal.
Speaker Change: With respect to these Oh gosh these impairment charges again tied into the stock price.
Speaker Change: Labor costs are what they are they may have stabilized, but I don't see them in there.
Speaker Change: It will go down considerably insurance.
Speaker Change: Insurance costs may stabilize maybe they won't but again I don't see them coming down so some of these problems.
Speaker Change: Just in the future, regardless, no food prices will be volatile muscle cramp again volatile.
Speaker Change: Question I have asked were commenting here on these calls is a shale.
Speaker Change: No.
Speaker Change: The share price.
Speaker Change: Lots of benchmark.
Speaker Change: While it's against other stocks.
Stocks, but there is a restaurant etfs.
Speaker Change: Restaurant and leisure.
Speaker Change: Indexes, if you will.
Speaker Change: Benchmark lock stop is dramatically underperformed peers.
Speaker Change: So you talked about trying to acquire the properties right now that doesn't seem to be happening.
Speaker Change: Introduce to us probably six months ago, a new concept of Asian answer that you're working on three months ago.
Speaker Change: Gave us a progress report I asked.
Speaker Change: It's successful.
Right in terms of revenues and how have you been scaling up.
Speaker Change: For some tidbits yours too.
Speaker Change: As a shareholder what still drive the stock.
Speaker Change: What are we waiting for.
Speaker Change: Are you waiting for another acquisition.
Speaker Change: Using pumps.
Speaker Change: What do we think we're going to wake up one day and all of a sudden labor cost is going to be down in Georgia.
Speaker Change: Give us a little color or guidance as to what we can expect Michelle.
Speaker Change: So two.
Speaker Change: Two things first of all.
Speaker Change: The and you're right.
Speaker Change: Sure.
Speaker Change: We are looking at various concepts that are not one offs.
Speaker Change: Sure.
Speaker Change: And Lucky pig is one of them and we think we're doing we think we're doing a decent business.
Speaker Change: Not great, but yeah, good business given the location in New York New York.
Speaker Change: The management of MGM is very happy.
Speaker Change: We are.
Speaker Change:
Speaker Change: Adding some new new product on top of what we have which was always the idea.
Speaker Change: So.
Speaker Change: I think we have a good concept there that is expandable.
Speaker Change: We're just playing with it a little bit now.
Speaker Change: But but it won't be fully.
Speaker Change: No.
It'll be fully.
Speaker Change: <unk>.
Speaker Change: Excuse me I'm missing at work.
Speaker Change: But the concept will be fully done in the next couple of weeks.
Speaker Change: We were adding a dumpling category and then we're going to see what the.
What the returns are on our capital and.
Speaker Change: And I think it's an expandable concept we're looking at.
Speaker Change: Is it I guess a lot of them.
Speaker Change: Yes, it's been operational for about three or four weeks now.
Speaker Change: I was out there for the opening of people are curious about it our signage was not complete when we opened is now complete.
Speaker Change: It's a good product, it's something that you.
Speaker Change: Now look for other locations.
Speaker Change: To try to see how it does in other venues it's.
Speaker Change: It's very hard to translate.
Speaker Change:
Speaker Change: You know what we're doing to in the E.
Speaker Change: You can't take the results in New York, New York, which is the casino and say, Okay. This thing will do well.
Speaker Change: On a street in Chicago.
Speaker Change: That's the next move here, we got to put it someplace in New York, We got to put up put it someplace in Philadelphia, perhaps we got to find locations and see how it does and what the response would be.
Speaker Change: So that's the next step with that.
Speaker Change: We're looking at other things that you know.
Speaker Change: Felipe.
Speaker Change: We can figure that would be expandable concepts.
Speaker Change: We're not giving up on buying one offs if the.
Speaker Change: If the EBITDA and cash flows are strong enough and could be meaningful for the company.
Speaker Change:
Speaker Change: And then.
Speaker Change: The other thing coloring his soul.
Speaker Change: Is what the situation is with Brian Park.
Speaker Change: It's sort of it doesn't paralyze us in sports stop us from doing other things, but you know that's a.
Speaker Change: A decent amount of EBITDA that we don't want to lose.
Speaker Change: That where we're fighting for.
Speaker Change: So that's.
Speaker Change: That's that's what we're doing now and a couple of other things that we are doing as well as you know we're looking at our existing businesses improving them.
Speaker Change: Being more efficient looking at payrolls.
Speaker Change:
Speaker Change: Working on our social media and our marketing to get more people through the doors to improve the existing business that we have.
Speaker Change: As we look at you know a couple of other concepts that have come across our.
Speaker Change: Desks in the in the last month or two you know things are more in the line that we're lucky pig.
Speaker Change: Fast casual that are replicable.
As opposed to full service restaurants that cost you know 234 or $5 million to build.
Yeah.
Speaker Change: Okay. Thank you gentlemen.
Speaker Change: Alright, Thank you Jeff.
Yeah.
Speaker Change: Thank you Mr. Weinstein, we have no further questions at this time I would like to turn the floor back over to you for closing comments.
Mr. Weinstein: Have a happy holiday everybody. Thank you. Thank you.
Okay.
Speaker Change: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.